A. Directly bet on the commodity itself is very risky for individual investors. ETFs are not not a good choice either because it get hit with the cost of rolling over the futures contract. So what's a smart way to play the oil rebound?
The May 2015 issue of Forbes magazine had an idea - find well managed high yield funds or even distressed funds with big concentrations in energy assets.
For example, making secured loans to hydraulic fracturing and other energy producers is out of individual investors' reach, it's such funds' job. The benefit for investors is good income along with the upside potential, without much risk.
Below is a list to consider (Name, Ticker, Yield, Energy Exposure, Expense) -
- Western Asset High Yield, WAHYX, 6.49%, 20%, 0.69%
- Franklin High Income Fund, FHAIX, 6.18%, 25%, 0.76%
- UBS Etracs Alerian MLP Infrastructure, MLPI, 4.91%, 93%, 0.85%
- Metropolitan West High Yield, MWHYX, 4.53%, 25%, 0.80%
- Vanguard Energy, VGENX, 2.17%, 98%, 0.37%
- SPDR S&P Oil & Gas Explor & Production, XOP, 1.40%, 99%, 0.35%